Prepare Your Business for Success: Liability and Tax Preparation

In this episode of Coffee with Carl, attorney Carl Zoellner covers everything you need to know about liability and tax preparation for your business.

Ever wonder what the Holiday looks like for your Government? 

Just imagine someone smiling, digging through your things. 

But we’re not talking about the digger, we’re covering how to not be nervous when they dig. 

So, let’s talk about preparation. When we start talking about taxes and liability concerns, there’s a different analysis that goes into each part of your business. 

When looking at liability and tax preparation, I tend to view it as a couple different things. Firstly, liability protection. I want to set up an appropriate asset protection structure using LLCs, corporations, and trusts, with layers that protect my personal assets from my business dealings and my business dealings from my personal dealings. 

We can do that with the different layers that we discuss in our asset protection structures. The reason we do this is we set them up because it’s not predictable when a liability event may occur. In this way, you’re preparing for the unpredictable. 

On average, we know real estate investors will be sued five times during their investing career. That’s not to scare anyone, it’s just a data point to know. Most cases, at some point you will be sued. That being said, I always talk about this as well. I’ve met people who were investing for 40 years, never had an issue, and I’ve met people who were investing for 40 minutes and have been sued five or six times. 

The ultimate point is we don’t know when it is coming, so that’s why we have to prepare for it. Liability can be anything from a minor disagreement in a claim, to an unfortunate and unforeseen event that occurred and someone was lost. 

Those types of events are not as uncommon as you would probably suspect and usually generate the stories that we tell during our presentations. “I wish we would have found you guys sooner because I don’t want it to happen again”. That’s our most commonly received phrase. 

Unlike liability, tax planning on the other hand, is almost 100% predictable. We know it’s coming every year, and we know we need to spend time planning. 

Now, I want you to pay special attention to that word planning, right? The preparation is actually a very, very small piece of the puzzle. That’s for you folks who are going to dump off the box of receipts and hope you’re going to get a good deduction at the end of the year. 

Hopefully you’re actually meeting with a CPA or your tax professional quarterly so you can put a plan together to put yourself in the best position. 

In the beginning, everything’s about running your numbers by calculating and getting a good return, but those who are really taking it to the next level, you’ll see them buy property for the deductions or accelerate the depreciation over necessarily the return. 

With liability protection, we have to be prepared for it because we don’t know when it’s coming. With tax preparation and planning, we should be planning and looking forward to it because we know it’s coming annually. 

The Takeaway 

I would encourage anyone who has more questions about any of this to contact us. We do offer classes covering all topics related to growing and protecting your business, our Structure Implementation Series, goes into this in a bit more in-depth. 

So until next time, thank you everyone for joining me with another episode of Coffee with Carl. 

As always, take advantage of our free educational content and every other Tuesday we have Toby’s Tax Tuesday, another great educational series. Our Structure Implementation Series answers your questions about how to structure your business entities to protect you and your assets. One of my favorites as well is our Infinity Investing Workshop.

Additional Resources:

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